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March 5, 2011

The Libyan turmoil only continues to escalate as there are reports of dozens of causalities in Zawiyah – a city near Tripoli. The current ramifications of these fights at face value on the crude oil market were reflected in the recent fluctuations in crude oil price during last week.

This turmoil continues to be a major contributing factor to the rise in the uncertainty in the Middle East.

Here is a weekly recap for February 28th to March 4th on the main changes in crude oil price, recapping the highlights on petroleum stocks, production and consumption in the US and the ramification of the news from Libya on the oil market:

Crude oil price

* This figure is calculated based on the percent change from the price at the beginning of the week compare to the price at the end of the week

Crude oil price (WTI spot) weekly average rose by 8.4% to reach an average 101.06$/b compare to last week’s average price of 93.21$/b. On average, crude oil price (WTI) daily change was 1.59%, and its price inclined by 7.54% from beginning to end of the week.

NYMEX Futures Price (future for March) much like WTI spot price, rose by 7.68% from beginning to end of the week as it settled on 104.43 $/ on Friday .

These figures show that WTI (spot and future) price rose very precipitately during the week, however it rose less than the previous week. This is understandable, as the Libyan turmoil only progressed to its third straight week, and thus there is diminishing rise in uncertainty that could be translated into oil prices inclinations.

In the mean time the ramifications of an oil shortage arriving from Libya are starting to be seen not only in this recent rise in crude oil price, but also in Europe’s supply of oil as I have pointed out in a recent post. Italy has a lot to lose from this turmoil in Libya as it gets nearly a quarter of its oil and 10% of its gas from Libya.

Libya, a member in OPEC, holds the largest oil reserves in Africa with 44 billion barrels as of January 2010, is a major exporter of oil mainly to countries in Europe such as Italy, Germany and France.

The IEA claims that total crude production has dropped from 1.6 million barrels per day to 600,000. This is because almost all the international oil companies operating in Libya, which account for nearly 72% of Libya’s oil production, have reported partial or full shut-in of output

Europe Brent spot price, also inclined by 3.07% from beginning to end of the week, and its average weekly price was 114.35$/b which is 4.1% above last week’s average.

The gap between the Brent and WTI spot prices was on Friday 11.30$/b – the lowest gap all week. As the upcoming week will progress, we will see if there is a trend in closing the gap between the two spot prices.

Crude oil charts

The following charts show the changes of WTI spot price, NYMEX Futures Prices (future for February) and Europe Brent spot price:

The chart above shows that all in all Brent price had a shallow downward trend while WTI had a shallow upward trend, however this is only part of the picture.

The graph above shows the erratic behavior I have referred to before, in which you can see many shifts throughout the week in the prices of oil.

Petroleum Stocks –highlights:

In my recent review on last week’s EIA report petroleum stocks, consumption and production in the US, oil stocks, continued falling for the third straight week; last week they have declined by 0.4%, a decrease of nearly 6.5 million barrels of crude oil to reach 1,777 million barrels.

This fall is related to the decline of Stocks of Total Gasoline by 1.5% or 3.5 million barrels– reaching 234 million barrels.

The average US production (million of barrels a day) was 5.601 on a four week average, higher than last week by 0.1%, and also higher by 2.0% compare to the average production at the same time last year.